How to avoid becoming collateral damage in the US-China “tech war”
The benefits of paying close attention to details of US export controls and economic sanctions
Amid global market uncertainties and shifting regulatory priorities, where the only constant is change, Taiwanese businesses still can plot strategic pathways to success.
Welcome to our fourth report on global trends and opportunities for Taiwanese companies and investors conducting business internationally.
Although disruptive forces continue to buffet markets worldwide, advantages exist for savvy business leaders who pay close attention to global trends and act accordingly.
With the United States focusing more and more on China's technology industry as a national security priority, Taiwanese companies should take specific steps to decrease their risk of becoming collateral damage in a US-China "tech war." Similarly, despite a heightening US-China trade war, careful assessments of any supply chains that include China-made parts and related actions can help protect Taiwanese companies' access to US markets.
Design patents offer increasingly useful protections for design-focused Taiwanese companies that operate in the US. In the energy sector, Taiwan's offshore wind sector demonstrates vibrant potential for growth, particularly if Taiwan successfully resolves a few key challenges.
A new dynamism in the European Union's approach to antitrust enforcement provides guidance for growth-focused Taiwanese companies. And a recent change to US antitrust enforcement policy provides a compelling incentive for Taiwanese businesses to review their internal compliance programs and controls.
We hope you find this useful, and we look forward to seeing Taiwanese businesses grow and thrive in the year ahead.
What a change in US criminal antitrust charging policy means for Taiwanese businesses.
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In July 2019, the Antitrust Division of the US Department of Justice (DOJ) announced a new policy to encourage the implementation of robust antitrust compliance programs by companies with any US business. The DOJ's new policy would reward companies that have developed a strong compliance and remediation program when deciding whether to bring criminal antitrust charges.
For Taiwanese businesses, the new US policy provides a compelling incentive to review your compliance programs and internal controls—and to adjust them, if necessary.
In the US—as in Taiwan and other countries—antitrust laws strictly prohibit agreements between competitors (or potential competitors) on pricing elements and other methods of competing for customers or markets. So-called price-fixing and market allocation or bid-rigging agreements can be prosecuted, even without any evidence of actual harm and without regard to a person's market share or harmful intent.
In the US, this risk is amplified by the possibility of criminal prosecution. Companies have paid hundreds of millions of dollars in fines. These criminal fines are in addition to civil liability that might be pursued by customers for alleged overcharges.
Individuals bear great personal risk for a criminal antitrust violation. The US government has charged many executives and employees over the last decade, with US law providing for up to ten years in prison.
Robust and effective compliance has therefore always been important to help mitigate company and employee risk. The recent changes to the US government's sentencing policy add an extra "sweetener" to incentivize companies to assess and update their policies.
As of July 2019, the DOJ had both revised its Justice Manual and released a new document on Evaluation of Corporate Compliance Programs in Criminal Antitrust Investigations (the Guidance) to guide US federal prosecutors' assessments of companies' compliance programs in the context of criminal antitrust violations.1
The DOJ deleted a statement in its Justice Manual that used to deny a company any credit for having an existing compliance program at the charging stage of an investigation and prosecution. Previously, the DOJ considered an antitrust violation to be evidence that a company's compliance program had failed to work effectively. And under its prior all-or-nothing self-reporting leniency program, only the first company to report criminal conduct could receive immunity from prosecution.
Now, the DOJ will evaluate each corporate compliance program on a case-by-case basis. The new compliance credit is not granted automatically. Instead, it may consider multiple factors affecting how specific compliance programs are designed, whether they are likely to prevent antitrust violations, and how they are implemented and operated.
The Guidance explains some of the essential components that a compliance program must demonstrate to qualify for DOJ credit and a deferred prosecution agreement (DPA).
The Guidance sets out nine factors:
Among these, the reporting mechanisms are particularly important. The DOJ mentioned the need for "prompt" self-reporting by companies both in its July 2019 announcement of the new policy and throughout the Guidance. Although the definition of "prompt" remains unclear, the new policy appears to provide more flexibility in timing.
Taiwanese companies should consider whether they have a sufficiently practical, sophisticated reporting channel for any US antitrust violations.
This generally means creating a channel that enables all internal reports to move upwards efficiently and quickly while fully assessing every report before it leaves the company. In planning this type of program, it's important to make sure to take into account privilege implications.
The DOJ policy emphasis on robust compliance warrants careful adjustments for a company's business scope. According to the Guidance, "an effective antitrust compliance program should be appropriately tailored to account for antitrust risk."
It may not be possible to follow a one-size-fits-all approach if the goal is implementing an effective and adequate internal control and investigation mechanism to guard against all potential wrongdoings.
Instead, taking steps to demonstrate a compliance program for your unique business may be a consideration that significantly improves effectiveness at preventing specific antitrust risks while also enhancing the chance of winning compliance credit from the DOJ.
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© 2019 White & Case LLP